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CCH® BENEFITS — 12/04/08

State Health Care Reform Update

From Spencer's Benefits Reports: For the last few years, states have been leading the way toward more comprehensive health care coverage to ensure that more people have or can obtain health insurance. Because of the potential impact of this ongoing activity on employer-provided health insurance benefits, Spencer's Benefits Reports provides regular updates about state health care reform.

In recent weeks, states increasingly have been facing declines in revenue and mounting in budget deficits. Many states are “scrambling to find ways to get through the rest of the year without hacking apart vital services or raising taxes,” according to the New York Times. Problems in the financial markets have had “immediate and widespread impact on state budgets.” According to the recent Government Accountability Office (GAO) report, State and Local Fiscal Challenges: Rising Health Care Costs Drive Long-Term and Immediate Pressures, the federal government counts on the states to fund programs like Medicaid, and during economic downturns, states can have difficulty financing health care programs and Medicaid.

For example, Kansas officials report that the state is facing a $136 million budget deficit this year, which will likely force additional budget cuts and prevent any new spending proposals, including health care expansion, according to the Kansas City Star. New York has proposed budget cuts intended to save $5.2 billion over the next 16 months, including cuts to Medicaid and other health care programs. Maine has proposed eliminating some services for low-income Medicaid beneficiaries to help reach the state goal of $100 million in cuts each year for the next two years. In Pennsylvania, Governor Ed Rendell has promised that Medicaid beneficiaries would not be affected by his order to cut 4.25% from the state’s budget, but some Republican lawmakers say that all programs must be considered for cuts, including Medicaid.

In addition, the election of Barack Obama has halted talks of health care reform in several states. Many state legislatures, such as Pennsylvania and Wisconsin, are waiting to see what the Obama Administration is going to do in regard to health care reform before acting, to ensure that their state’s program complies with the federal program. However, there has been health care activity in the states the past few weeks, as follows:

Arizona. Arizona is one of 44 states that provide an independent review of health insurance coverage disputes, and since 2003, has approved fewer than one in five appeals from consumers whose insurance companies refused to pay for a claim or approve a medical procedure. According the Arizona Daily Star, officials said the low percentage of approvals are because the cases are “long-shot challenges that do not jibe with the terms spelled out in insurers’ contracts.” Arizona’s average is a little higher than the national average: a study from America’s Health Insurance Plans found that state-administered appeals programs upheld the health insurer’s decision in 59% of the cases in 2006. For more information, visit http://www.id.state.az.us/consumermore.html#healthhca.

California. State officials are considering freezing enrollment in the Healthy Families program, as an “influx of new clients overwhelms” it, the Los Angeles Times reports. The program is facing a $17.2 million deficit that could lead to children losing their coverage. The Healthy Families program covers 900,000 children in the state, and new enrollment in the program has exceeded more than 27,000 per month during the past year. According to Leslie Cummings, executive director for the state’s Managed Risk Medical Insurance Board, which administers Healthy Families, only two options exist. First, the state could immediately increase funding. Otherwise, capping enrollment seems the logical choice: “capping enrollment, rather than eliminating coverage that a child currently has, seems the preferable path.” If Healthy Families does cap enrollment, some say approximately 162,000 children could be on the waitlist by June 2009. For more information, visit http://www.mrmib.ca.gov/.

Colorado. Employer-sponsored health insurance premiums are expected to rise 13.7% in 2009, according to the 2009 Colorado Employer Benefits Survey Report. This is higher than the national average of 6% to 8% for the same period. Over two-thirds of Colorado employers plan to transfer some of the cost increase to their employees. For more information, visit http://www.colorado.gov/cs/Satellite/HCPF/HCPF/1197364086675.

Illinois. The Illinois legislature passed a bill that would mandate insurance coverage of up to $36,000 a year for autism. The bill requires insurance companies to cover treatment until a patient turns 21; approximately 4,500 families in Illinois would qualify for the coverage. Kim Maisch, state director of the National Federation of Independent Business is against the bill because it is “going to affect small and medium-sized businesses that buy health insurance in an open market for their employees.” For more information, visit http://autismillinois.org/ or http://www.illinois.gov.

Kentucky. Health care advocates in Kentucky have launched http://www.kyvoicesforhealth.org, which offers news about health care, resources for families seeking health care coverage, data, research, blogs, and discussion forums. Approximately 570,000 state residents are without health care coverage, and the site provides a central place for people seeking health care information.

Louisiana. Governor Bobby Jindall has revealed the details of the Louisiana Health First initiative, a program aimed at restructuring the state’s Medicaid program by shifting thousands of low-income children and adults from the current fee-for-service model to private managed care networks. The plan is designed to cut costs and to improve the health outcomes for Medicaid beneficiaries, but the plan does not include details of how it will be financed, according to the New Orleans Time-Picayune. The plan also must be approved by the state legislature and federal government before it can be implemented. For more information, visit http://www.dhh.louisiana.gov/offices/?ID=349.

Maryland. The Maryland Citizens’ Health Initiative recently unveiled a universal health care proposal, which would require all state residents to purchase health insurance coverage. Under the plan, the state would create an insurance pool, provide catastrophic insurance, and expand Medicaid eligibility. Residents who do not purchase coverage would be penalized, but subsidies and exemptions would be available to those who cannot afford the cost of health care coverage. It is estimated that 1.36 million residents would get insurance through the pool and about 60% of them would be eligible for the subsidy. The program is estimated to cost $15.5 billion in the first five years, and would be funded mainly through a 2% payroll tax, but also though increases in alcohol and tobacco taxes. State delegate James Hubbard plans to introduce the proposal in January 2009, according to the Baltimore Sun. For more information, visit "http://www.healthcareforall.com/HTML1.phtml".

Minnesota. While the Bush Administration has opposed the use of SCHIP funds for adults, Minnesota has been granted a waiver to allow the state to continue providing SCHIP coverage for some parents through June 2011. Without the waiver, Minnesota would have lost up to $130 in federal matching funds over the next three years. It also will allow the state to cover 18,000 parents. For more information, visit http://www.health.state.mn.us/index.html.

Pennsylvania. According to Frederic Jarrett, a surgeon and clinical professor at the University of Pittsburgh, the “Cover All Pennsylvanians” plan proposed by Gov. Ed Rendell will “increase the cost of practicing medicine, make health care more expensive, and drive doctors out of the state.” Mr. Rendell plans to fund his project by using the surplus in Pennsylvania’s MCARE abatement program, which helps physicians pay for medical malpractice insurance. The $500 million surplus in MCARE is “used if and as needed to abate physician premiums,” according to Mr. Jarrett. The Department of Health reported that the number of physicians practicing in Pennsylvania has decreased by 6% in the last few years, and these trends will only get worse if the MCARE surplus is cut off, according to Mr. Jarrett. For more information, visit http://www.ohcr.state.pa.us/.

Utah. The Utah legislature’s Health System Reform Task Force has presented a blueprint for prospective legislation, and focuses on ways to preserve the private insurance industry, while creating more affordable plans, the Salt Lake Tribune reports. The blueprint also recommends that any laws remove barriers, such as coverage mandates, to affordable policies; allow business to let employees shop for their own plans; increase transparency; create standards for the exchange of electronic health records; simplify administrative process; require that state-contracted firms provide coverage; and implement medical malpractice reforms. For more information, visit http://www.healthpolicyproject.org/.

Wisconsin. Eighteen counties in the western part of the state are banding together to form the Cooperative Health Choices of Western Wisconsin, which will negotiate with insurers to help make health care insurance more affordable and keep premium increases low. Any business, nonprofit, trade group, or union that operates within the specified region may join. Cooperatives are popular in Wisconsin: nearly 3 million residents are members of at least one of 800 such groups. For more information, visit http://www.unitedscv.com/chchealth.htm.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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